DUBAI Shops in Tehran's Grand Bazaar stayed shut and police patrolled the area on Thursday as authorities struggled to restore normalcy a day after security forces clashed with anti-government demonstrators angered by the collapse of the currency.
Several traders from the bazaar, whose merchants played a major role during Iran's 1979 Islamic revolution, told Reuters by telephone that most stores were closed as businessmen stayed away for safety reasons.
On Wednesday, riot police fought demonstrators and arrested money changers in the area during protests triggered by the collapse of the Iranian rial, which has lost about a third of its value against the dollar over the past week.
Political pressure on President Mahmoud Ahmadinejad rose on Thursday as business associations blamed him for the country's economic crisis, which has been worsened by Western sanctions imposed over Iran's disputed nuclear programme.
Associations representing production, distribution and service sectors said Ahmadinejad's administration had devastated the economy with mistaken policy decisions, according to the semi-official Mehr news agency.
The associations agreed that the Grand Bazaar, one of the capital's main shopping areas, would reopen on Saturday in the presence of security forces, Mehr reported.
In a sign that the protests still do not threaten Iran's Islamic system of government or Supreme Leader Ayatollah Ali Khamenei, a statement by the associations stressed that "they continue to adhere to the system and the revolution", Mehr said.
The rial has lost about two-thirds of its value against the dollar since June last year because of the sanctions, which have slashed Iran's earnings from oil exports. The currency's losses have accelerated in the past 10 days after a failed government attempt to stabilise it with a new foreign exchange centre.
The slide has cut living standards, forced Iran to reduce its imports and fuelled job losses in the industrial sector. It has also boosted inflation, which Steve Hanke, an economics professor at Johns Hopkins University in the United States, said had now become hyperinflation.
The government officially puts the annual inflation rate at around 25 percent but Hanke estimated that in the past 10 days, prices in Iran had started rising at a rate which would mean 50-60 percent inflation in a single month.
The rial's fall is "throwing a monkey-wrench into the stability of the economy. Iran is really getting buffeted around," he said.
Free-market trading in the rial appears to have almost ground to a halt because of the immense volatility and the government's assault on money changers. In a defiant news conference on Tuesday, Ahmadinejad defended his economic record and blamed speculators for the rial's collapse.
The rial last traded at about 37,500 against the dollar on Tuesday, a record low, compared to around 24,600 on Monday last week, traders said. On Wednesday, there was no serious trade in the currency, dealers in Tehran and Dubai told Reuters.
Some currency traders said on Thursday that activity was starting to resume, but volumes were low and dealers could not quote reliable rates accepted by the entire market. (Additional reporting by Zahra Hosseinian; Writing by Andrew Torchia; Editing by Giles Elgood)